Topic 1- Creating A Leverage Effect

Please watch this video before proceeding to the next topic and marking as “Completed”

Congratulations! You’ve made it through the first three modules of income allocation. And now we’re going to look at some additional examples and drive home the points that will help you build your financial foundation for retirement. Making that conversion from asset allocation and growth strategies, to income allocation and income strategies. So we look at the effects of how leveraging can affect our planning in retirement. The strategy of using borrowed money to increase returns on investment is referenced as leveraging. If the return on our total value invested in the security, your own cash plus borrowed funds, is higher than the interest you pay on the borrowed funds, you could make a significant profit. How does leveraging work in our case? Let’s talk about how we could position $1 today for greater income potential in the future. Also greater potential for a higher percentage payout of our income, then asset allocation withdrawal rates that were discussed earlier at two or 3%. The advantages of using these leveraging principles are that we can take a smaller amount of money needed to create the same amount of income.